Avoiding capital gains tax on cryptocurrency requires careful planning and understanding of tax laws in your jurisdiction. Donating crypto directly to a qualified charity is often more tax-efficient than selling it first and donating the proceeds. This is because you can deduct the fair market value of the cryptocurrency at the time of donation, up to certain limits, avoiding the capital gains tax you’d otherwise incur on the sale. This contrasts sharply with donating cash, where you only deduct the amount donated after taxes have already been paid.
However, this strategy isn’t a loophole; the IRS closely scrutinizes crypto donations. Accurate record-keeping is paramount. You need meticulous documentation of the purchase date, cost basis, and the fair market value on the donation date. Using a reputable cryptocurrency tax software platform to track transactions and generate accurate reports is highly recommended. Failing to maintain proper documentation can lead to audits and penalties.
Furthermore, the tax implications vary depending on factors like the type of cryptocurrency, the holding period (short-term vs. long-term capital gains), and your individual tax bracket. The “20% or higher” capital gains rate mentioned is a simplification; rates can differ significantly. Consult a qualified tax advisor experienced in cryptocurrency taxation for personalized guidance tailored to your specific circumstances. They can help you navigate the complexities of crypto taxation and optimize your strategy, potentially exploring other tax-advantaged methods like tax-loss harvesting or qualified opportunity funds (QOFs), where applicable.
Lastly, be aware of the potential for gift tax implications if you donate a substantial amount of cryptocurrency. Gifting limits apply, and exceeding them can result in additional tax liabilities. Understanding these nuances is essential for making informed decisions.
What is the new IRS rule for digital income?
The IRS is cracking down on unreported digital income, impacting anyone earning over $5,000 through platforms like PayPal and Venmo starting in the 2024 tax year. This isn’t just limited to traditional online businesses; it encompasses freelance work, selling goods online (think Etsy), and even payments for services like concert tickets or used clothing.
What does this mean for crypto users? This new rule has significant implications for those involved in the crypto space. While the IRS announcement doesn’t specifically mention cryptocurrency, the broad scope of the regulation means income from crypto transactions, including:
- Crypto-to-crypto trading profits: Any profit made by exchanging one cryptocurrency for another is considered taxable income.
- Staking rewards: Rewards earned from staking cryptocurrencies are taxable as income.
- Airdrops: Receiving cryptocurrency as an airdrop is a taxable event.
- NFT sales: Profit from the sale of non-fungible tokens (NFTs) is subject to capital gains tax.
Key Considerations:
- Accurate Record Keeping: Maintain meticulous records of all cryptocurrency transactions, including dates, amounts, and exchange rates. This is crucial for accurate tax reporting and avoiding penalties.
- Tax Software: Consider utilizing tax software specifically designed to handle cryptocurrency transactions. These programs can help you accurately calculate your tax liability and generate the necessary forms.
- Consult a Tax Professional: The complexities of cryptocurrency taxation can be significant. Consulting a tax professional with expertise in digital assets is strongly recommended to ensure compliance.
- Form 1099-K: Be aware that you may receive a Form 1099-K from payment processors if your income exceeds $600. This form reports your gross payment activity and is used by the IRS to track income. This reporting threshold is independent of the $5000 threshold and might apply to smaller crypto transactions processed through third-party platforms.
Ignoring this new rule could result in significant penalties. The IRS is actively pursuing tax compliance in the digital economy, so proactive and accurate reporting is paramount.
Do you have to pay taxes on crypto if you reinvest?
Yes, you absolutely still owe capital gains taxes on cryptocurrency profits, even if you immediately reinvest them. The IRS considers any sale of crypto a taxable event, regardless of what you do with the fiat currency or the newly acquired crypto afterwards. Think of it this way: the tax is on the profit you realized from the sale, not on the reinvestment itself.
Cost basis is crucial here. Accurately tracking your cost basis for each cryptocurrency transaction is vital for calculating your capital gains or losses. Different methods exist (FIFO, LIFO, specific identification), and choosing the right one can significantly impact your tax liability. Failure to properly track this can lead to penalties and audits.
Tax-loss harvesting is a strategy some traders use to offset capital gains. Selling losing crypto assets can generate a loss to reduce your overall taxable income. However, be mindful of the “wash-sale” rule, which prevents you from claiming a loss if you repurchase the same cryptocurrency within 30 days.
Consult a tax professional. Cryptocurrency tax laws are complex and constantly evolving. Seeking advice from a qualified professional specializing in cryptocurrency taxation is highly recommended to ensure compliance and optimize your tax strategy.
How much crypto can I cash out without paying taxes?
The question of how much crypto you can cash out tax-free is a common one, and the answer isn’t a simple number. There’s no magic threshold. The crucial factor isn’t the *amount* withdrawn, but rather *what you do with it*.
Simply moving crypto: Transferring cryptocurrency from an exchange to your personal wallet doesn’t trigger a taxable event. This is akin to moving money between your checking and savings accounts – no tax implications arise from the transfer itself.
Taxable events: Taxes come into play when you engage in transactions that represent a realization of gain or loss. This occurs in several scenarios:
- Selling crypto for fiat currency (USD, EUR, etc.): This is a clear taxable event. The profit (or loss) is calculated by subtracting your original cost basis from the sale price.
- Exchanging one cryptocurrency for another: Similar to selling for fiat, exchanging Bitcoin for Ethereum, for example, is a taxable event. The profit or loss is determined by the difference in value at the time of the exchange.
- Using crypto to purchase goods or services: This is also considered a taxable event. The value of the goods or services received is considered the sale price, and the profit or loss is calculated accordingly.
Cost Basis: Accurately tracking your cost basis is paramount. This is the original price you paid for the cryptocurrency, including any fees. Various methods exist for tracking, from spreadsheets to dedicated crypto tax software. Improperly tracking your cost basis can lead to significant tax liabilities.
Capital Gains Taxes: The tax rate on your crypto profits depends on your holding period and your overall income. Short-term capital gains (assets held for less than one year) are taxed at your ordinary income tax rate, while long-term capital gains (assets held for over one year) have a lower tax rate. Consult a tax professional for personalized guidance.
- Record-Keeping: Meticulous record-keeping is essential. Keep detailed records of all transactions, including dates, amounts, and cost basis.
- Seek Professional Advice: Crypto tax laws are complex and constantly evolving. Consulting a tax advisor specializing in cryptocurrency is highly recommended.
Which crypto exchanges do not report to the IRS?
The IRS requires cryptocurrency exchanges operating within the US, or those with US users, to report transaction data. However, several exchanges circumvent this requirement.
Decentralized Exchanges (DEXs): DEXs like Uniswap and SushiSwap operate differently than traditional centralized exchanges (CEXs). They don’t hold users’ funds; instead, they facilitate peer-to-peer trading via smart contracts. This decentralized nature makes it extremely difficult, if not impossible, for them to comprehensively track and report user activity to the IRS. This doesn’t mean transactions are untraceable on the blockchain, just that the exchanges themselves aren’t collecting the data in a readily reportable format.
Peer-to-Peer (P2P) Platforms: Platforms facilitating direct cryptocurrency trades between individuals often operate outside regulatory oversight. They typically don’t act as custodians of funds, making reporting to tax authorities challenging. While many such platforms may operate in a gray area, it’s crucial to understand that the *individual* still has a tax reporting obligation for any cryptocurrency transactions, regardless of the platform used.
Foreign-Based Exchanges: Cryptocurrency exchanges located outside the US aren’t obligated to comply with US tax reporting regulations unless they have a significant presence within the US. This doesn’t eliminate the tax liability for US citizens or residents who use these exchanges. It simply means the exchange isn’t proactively providing information to the IRS.
No KYC Exchanges: Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations require exchanges to verify user identities. Exchanges that don’t implement KYC/AML procedures are often more difficult for regulatory bodies to monitor and are more likely to operate outside of reporting requirements. Using such exchanges carries significant risk, including potential legal consequences and loss of funds.
Important Note: Even if an exchange doesn’t report to the IRS, you are still responsible for accurately reporting your cryptocurrency transactions on your tax return. The IRS actively monitors blockchain activity and can cross-reference information from various sources to identify unreported income.
- Tax Implications: Capital gains and losses from cryptocurrency trades are taxable events. Accurate record-keeping is paramount.
- Record Keeping: Maintain detailed transaction records, including dates, amounts, and exchange details for every transaction.
- Seek Professional Advice: Consult with a tax professional specializing in cryptocurrency for personalized guidance.
How long do you have to hold crypto to avoid taxes?
Imagine you buy cryptocurrency. If you sell it within one year, the profit is taxed as regular income. This means your tax rate could be anywhere from 0% to 37% in 2024, depending on how much you make overall. This is often called a “short-term capital gain”.
However, if you hold onto that crypto for more than a year before selling, the profit is taxed at a lower long-term capital gains tax rate. These rates are generally lower than your regular income tax rates. The exact rates depend on your income bracket and the year.
It’s important to note that this “one year” rule applies to each individual cryptocurrency trade. Buying and selling different cryptos at various times will mean different tax implications for each transaction. Always keep precise records of your cryptocurrency transactions including the date of purchase, the date of sale, and the amount of each.
Tax laws are complex, and this is a simplified explanation. Consult a tax professional for personalized advice, especially if you have complex trading strategies or significant cryptocurrency holdings.
Is converting crypto to USD taxable?
Yes, converting crypto to USD is a taxable event. The IRS views crypto as property, not currency. This means every transaction – buying, selling, or exchanging – triggers a tax liability. You’ll either realize a capital gain (profit) or a capital loss (loss). This applies even if you’re just swapping one crypto for another.
Key Considerations:
- Tax Basis: Your cost basis (what you initially paid for the crypto) determines your gain or loss. Accurate record-keeping is crucial – track every transaction meticulously.
- Short-Term vs. Long-Term Capital Gains: Holding crypto for less than a year results in short-term capital gains taxed at your ordinary income rate. Holding it longer qualifies for potentially lower long-term capital gains rates. This is a significant difference, so understand the implications.
- Wash Sales: Don’t try to game the system. The IRS is aware of wash sale rules. Selling a crypto at a loss to claim a deduction and then immediately buying it back (or a substantially similar asset) can be disallowed.
- Mining and Staking: Income from crypto mining or staking is taxed as ordinary income. This means it’s subject to higher tax rates than long-term capital gains.
- Gifting and Inheritance: Gifting crypto has tax implications for both the giver and receiver. The giver typically realizes a capital gain based on the market value at the time of the gift. Inheritance is different and carries its own set of tax rules. Consult a tax professional for advice in these situations.
Pro Tip: Use accounting software specifically designed for crypto transactions to simplify tracking and reporting. Don’t underestimate the complexity – professional tax advice is often worthwhile to ensure compliance and minimize your tax burden.
Is crypto a good investment?
Crypto is inherently high-risk. Its volatility is legendary; massive swings are the norm, not the exception. Don’t let the get-rich-quick narratives fool you.
Understanding the risks is crucial:
- Market Manipulation: The crypto market is susceptible to manipulation by whales and coordinated efforts, leading to sudden crashes or pumps.
- Regulatory Uncertainty: Government regulations are constantly evolving and differ widely across jurisdictions. This uncertainty can significantly impact prices.
- Security Risks: Exchanges and wallets are targets for hackers. Losing your private keys means losing your crypto – permanently.
- Technological Risks: Underlying blockchain technology is still developing. Bugs, scaling issues, and unforeseen vulnerabilities can have disastrous consequences.
Successful crypto investing requires a long-term perspective and a diversified approach:
- Diversify your portfolio: Don’t put all your eggs in one basket. Spread your investments across different cryptocurrencies and asset classes.
- Dollar-cost averaging (DCA): Invest regularly, regardless of price fluctuations. This mitigates risk by averaging your purchase price.
- Thorough research: Understand the fundamentals of the projects you’re investing in. Look beyond hype and marketing.
- Risk tolerance: Only invest what you can afford to lose. Crypto is highly speculative.
Does crypto need to be reported to the IRS?
Yes, crypto is absolutely taxable by the IRS. They consider it property, not currency, leading to significant tax implications on virtually all transactions.
Key Taxable Events:
- Buying/Selling: Capital gains or losses are triggered when you sell or exchange crypto for fiat currency or other cryptocurrencies. Your cost basis (original purchase price) is crucial for calculating these gains or losses. Proper record-keeping is paramount.
- Trading: Every trade, even between different cryptocurrencies, is a taxable event. This includes DeFi activities like staking and yield farming.
- Mining: Cryptocurrency mined is considered taxable income at its fair market value on the date of receipt.
- Airdrops and Forks: Receiving free crypto through airdrops or forks is also a taxable event, valued at the fair market value at the time of receipt.
- Gifting: Gifting crypto involves gift tax implications based on the fair market value at the time of the gift. Annual gift tax exclusion limits apply.
Tax Forms: You’ll likely need Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D (Capital Gains and Losses) to report your crypto transactions.
Record Keeping is Crucial: Maintain meticulous records of all transactions, including dates, amounts, and cost basis for each crypto asset. This includes screenshots of transactions, wallet addresses, and exchange statements. Consider using dedicated crypto tax software to simplify the process.
Tax Implications are Complex: Crypto taxation is intricate, involving various aspects like wash sales, like-kind exchanges (currently unavailable for crypto), and the complexities of DeFi transactions. Consult a qualified tax professional specializing in cryptocurrency for personalized advice, especially for high-volume trading or complex strategies. Ignoring these tax liabilities can lead to significant penalties.
Do you have to pay taxes on crypto if you buy it?
The IRS treats cryptocurrency as property, not currency. This means that unlike traditional assets, there’s no “wash sale” rule for crypto. This can be advantageous, allowing you to sell a losing asset and immediately repurchase it without tax implications. However, it also means that every transaction carries potential tax consequences.
Buying crypto itself isn’t a taxable event. Holding onto your Bitcoin, Ethereum, or other cryptocurrencies without selling or spending them doesn’t trigger any tax liability. It’s only when you dispose of your crypto assets that you’ll have a taxable event.
This disposal can happen in two main ways: selling your crypto for fiat currency (like USD), or spending it to acquire goods or services. Selling crypto results in a capital gain or loss, calculated as the difference between your purchase price (cost basis) and the selling price. This gain or loss is then subject to capital gains tax rates, which vary depending on how long you held the asset (short-term vs. long-term).
Using crypto to purchase something, such as a cup of coffee or a car, is also considered a taxable event. In this scenario, the fair market value of the crypto at the time of the transaction is considered your selling price, and the cost basis remains the same as when you acquired the cryptocurrency. This can create complex tax situations, particularly if you frequently use crypto for everyday purchases.
Accurate record-keeping is crucial. Keep detailed records of all your crypto transactions, including purchase dates, amounts, and selling prices. This will make tax season significantly less stressful and will help ensure you comply with all applicable regulations. Consider using specialized crypto tax software to help manage your records and calculate your tax liability.
Remember, tax laws are complex and can change. Always consult with a qualified tax professional for personalized advice tailored to your specific circumstances.
How to avoid paying capital gains tax?
Minimizing capital gains tax on cryptocurrency investments requires a sophisticated approach beyond traditional tax-advantaged accounts. While retirement accounts like 401(k)s and IRAs offer tax-deferred growth, they often have limitations on cryptocurrency holdings.
Strategies for Tax Optimization:
- Tax-Loss Harvesting: Offset capital gains with capital losses. This involves selling losing investments to generate a loss that can reduce your taxable gains. Careful planning is crucial to avoid the wash-sale rule.
- Holding Period: Long-term capital gains (holding assets for over one year) are taxed at lower rates than short-term gains. Strategically holding assets can significantly reduce your tax burden.
- Qualified Disposition: Understanding the rules around qualified dispositions can be beneficial. Certain types of transactions may allow for tax-advantaged treatment.
- Donating Crypto to Charity: Donating cryptocurrency to a qualified charity can offer a double benefit: deducting the fair market value of the donation from your taxes and avoiding capital gains taxes.
- Gifting Crypto: Gifting cryptocurrency allows you to transfer assets without paying capital gains tax, but the recipient will be responsible for paying taxes on any future gains.
Advanced Considerations:
- Tax Jurisdiction: Tax laws vary significantly across jurisdictions. Understanding the tax implications in your specific location is paramount.
- Staking and Lending: The tax treatment of staking rewards and interest from lending platforms is complex and varies depending on the specifics of each platform and jurisdiction. Consult a tax professional for guidance.
- DeFi Activities: Yield farming, liquidity provision, and other DeFi activities generate taxable income. Accurately tracking these transactions is vital for accurate tax reporting.
- NFT Sales: The tax implications of NFT sales are similar to those of other capital assets. The holding period and the nature of the NFT determine the tax rate.
Disclaimer: This information is for educational purposes only and should not be considered tax advice. Consult with a qualified tax professional for personalized guidance tailored to your specific circumstances.
Do you need to file crypto taxes if you don’t sell?
Holding cryptocurrency without selling doesn’t trigger capital gains taxes. This is because you haven’t realized a gain – the increase in value is only on paper (or, more accurately, on your crypto wallet). Unrealized gains are not taxable.
However, the tax implications of crypto go beyond capital gains. Several other scenarios can lead to tax liabilities, even without selling.
- Staking and Lending: Earning interest or rewards through staking or lending your crypto can be considered taxable income. This is typically taxed as ordinary income, often at a higher rate than capital gains.
- Mining: The cryptocurrency you mine is considered taxable income at the fair market value at the time it’s received.
- AirDrops and Forks: Receiving new crypto assets through airdrops or forks is generally considered taxable income at the fair market value at the time of receipt.
- Crypto Payments for Goods and Services: Using crypto to purchase goods or services is generally treated as a sale, and any gains are taxable. Conversely, receiving crypto as payment for services renders that crypto taxable as ordinary income.
Key Considerations:
- Record Keeping is Crucial: Meticulously track all your crypto transactions, including dates, amounts, and the fair market value at the time of each transaction. This is essential for accurate tax reporting.
- Seek Professional Advice: Crypto tax laws are complex and constantly evolving. Consulting a tax professional specializing in cryptocurrency is highly recommended.
- Tax Laws Vary by Jurisdiction: Tax rules differ significantly between countries. Ensure you understand the specific regulations in your area.
In short: While simply holding crypto without selling avoids capital gains taxes on unrealized gains, various other activities involving crypto can trigger tax liabilities. Careful record-keeping and professional advice are essential to ensure compliance.
Will I get audited for not reporting crypto?
The IRS is increasingly focused on cryptocurrency transactions. Failing to report cryptocurrency income, such as gains from selling or trading crypto, or even crypto received as payment for goods or services, is a major red flag that can lead to an audit. This isn’t limited to large transactions; even seemingly small unreported transactions can accumulate and trigger scrutiny.
The IRS uses various methods to detect unreported cryptocurrency income, including information reporting from exchanges, matching data from third-party payment processors, and analysis of your overall tax return for inconsistencies. They’re actively working to improve their data-gathering capabilities in this area.
Accurate record-keeping is crucial. You need detailed records of all cryptocurrency transactions, including the date, the amount, the type of cryptocurrency, and the recipient. Consider using specialized cryptocurrency tax software to help you track these transactions and calculate your capital gains or losses.
Understanding the tax implications of various cryptocurrency activities is paramount. This includes staking rewards, airdrops, and DeFi activities, all of which can be taxable events. Consulting with a tax professional specializing in cryptocurrency is highly recommended to ensure compliance and avoid potential penalties.
The penalties for failing to report cryptocurrency income can be substantial, including back taxes, interest, and even potential criminal charges in cases of intentional tax evasion. Proactive reporting and accurate record-keeping are far less costly and stressful than facing an audit.
Does swapping crypto count as capital gains?
Swapping one cryptocurrency for another, often referred to as a “crypto-to-crypto” trade, absolutely counts as a taxable event. This isn’t different from trading stocks; the IRS considers it a taxable transaction.
Understanding the Tax Implications: The key to understanding the tax implications lies in determining your cost basis and the fair market value (FMV) at the time of the swap.
- Cost Basis: This is the original amount you paid for the cryptocurrency you’re trading. This includes the purchase price plus any fees associated with the acquisition.
- Fair Market Value (FMV): This is the value of the new cryptocurrency you received in the swap at the exact moment the trade was executed. This is usually determined by the price on a reputable exchange at the time of the transaction.
Calculating Capital Gains or Losses: The difference between the FMV of the received cryptocurrency and your cost basis of the cryptocurrency you traded determines your capital gain or loss. A positive difference results in a capital gain, while a negative difference leads to a capital loss. These gains or losses are generally considered short-term or long-term, depending on how long you held the initial cryptocurrency before the swap. Short-term gains are taxed at your ordinary income tax rate, while long-term gains have preferential tax rates.
Example: Let’s say you traded 1 Bitcoin (BTC) with a cost basis of $20,000 for 5 Ethereum (ETH) at a FMV of $25,000. You have a $5,000 capital gain ($25,000 – $20,000).
Important Considerations:
- Record Keeping: Meticulously track all your cryptocurrency transactions, including dates, amounts, and cost basis. This is crucial for accurate tax reporting.
- Tax Software: Consider using specialized tax software designed for cryptocurrency transactions. These tools can help simplify the process of calculating gains and losses.
- Professional Advice: Consult a tax professional experienced in cryptocurrency taxation. The complexities of crypto tax laws can be significant, and professional guidance is highly recommended.
Tax Implications Vary by Jurisdiction: Remember that tax laws regarding cryptocurrency differ by country and even by state or region within a country. Always check the specific regulations applicable to your location.
What is the 6 year rule for capital gains tax?
The “6-year rule” for capital gains tax, while not directly related to crypto, offers a useful parallel when considering long-term investment strategies. Think of your primary residence as a long-term HODL of a particularly stable asset (your home). Just as you might hold Bitcoin for years anticipating appreciation, you can similarly hold your home, benefiting from potential price increases without immediate tax implications.
The core principle is this: You can claim a full capital gains tax exemption on the sale of your principal place of residence (PPOR). This is akin to selling Bitcoin after a long period, potentially realizing a significant gain without paying capital gains tax – but only under specific circumstances.
The 6-year twist: The rule extends this exemption for up to six years even if you move out and rent the property. This is like temporarily staking your Bitcoin; you’re not actively trading it, but you’re still deriving income (rent) and retaining the potential for long-term appreciation. This period allows for life changes such as job relocation or family circumstances without immediately triggering a tax liability on the property’s appreciation.
Important Note: This isn’t a get-out-of-jail-free card. There are conditions. The legislation likely specifies requirements around the intention to return, the duration of the rental period, and potentially even the length of time you originally lived there. These details mirror the complexities of various tax laws governing crypto transactions, highlighting the need for precise understanding of regulations before engaging in long-term holdings.
Crypto Analogy: Imagine your crypto holdings as a portfolio of various assets. The 6-year rule emphasizes the importance of long-term strategies and understanding the tax implications of your asset allocation. Just as with real estate, a well-planned approach to crypto investment minimizes tax liabilities and maximizes potential gains. Thorough research into tax laws surrounding crypto transactions is crucial, just as it is crucial to understand the specifics of the 6-year rule concerning your PPOR.
Disclaimer: This information is for general understanding and should not be considered financial or legal advice. Consult a qualified professional for personalized guidance.
How much crypto is not taxable?
The amount of untaxed crypto depends entirely on your gains and holding period. There’s no fixed amount that’s universally tax-free. It’s crucial to understand the difference between short-term and long-term capital gains.
Short-term capital gains (assets held for one year or less) are taxed as ordinary income, meaning they’re subject to your individual income tax bracket. This means your tax liability will depend on your total taxable income, not just your crypto profits.
Long-term capital gains (assets held for more than one year) benefit from lower tax rates in the US. For 2024 sales (taxes due April 2025), these rates are:
Single Filers:
0% on income up to $47,025
15% on income between $47,026 and $518,900
20% on income over $518,901
Married Filing Jointly:
0% on income up to $94,050
15% on income between $94,051 and $583,750
20% on income over $583,751
Important Considerations: These are just the federal rates. State taxes may also apply, varying significantly by location. Accurate record-keeping of all crypto transactions (including date of acquisition, cost basis, and sale price) is absolutely vital for proper tax calculation. Consult a qualified tax professional specializing in cryptocurrency for personalized guidance. Ignoring crypto taxes can lead to severe penalties.
Remember, the tax implications of crypto are complex and constantly evolving. Staying informed is crucial to minimizing your tax burden and avoiding legal issues.
How do billionaires avoid capital gains tax?
Look, the ultra-wealthy, like the Waltons, Kochs, and Mars families, aren’t dodging taxes; they’re *mastering* the system. They leverage several key strategies. Holding assets indefinitely is the cornerstone – no sale, no capital gains tax. Think about it: a billion-dollar company? They don’t need to sell it to get cash. They simply borrow against their massive asset holdings, accessing liquidity without triggering a taxable event. This is a game of financial engineering, not tax evasion.
But the real magic is the stepped-up basis at inheritance. This is the ultimate tax loophole. When a billionaire dies, the cost basis of their assets is “stepped up” to their fair market value at the time of death. This means their heirs inherit the assets with a significantly higher basis, effectively wiping out any past capital gains. This is generational wealth preservation at its finest. It’s a legal way to transfer massive wealth tax-free, effectively making capital gains taxes irrelevant over multiple generations. This isn’t clever; it’s systemic. The system is designed to benefit those who already possess enormous wealth.
